Innovation is the key to maintain competitive advantage in a market and gain leadership. Ideas are the most essential input for an innovation process to start. Innovation has long been considered as a prominent growth engine to brace competitiveness of the firm in the market. Also, Innovation plays a key role in providing sustainability and growth for the firm. But yet firms are not clear about the type of innovation management practices that need to be adopted for generating an idea and developing a product. A shortened product life cycle, constantly growing research and development cost, more rapid information flows, and increasingly interconnected customers have supported a paradigm shift toward an open approach to innovation. A firm needs to choose between Open Innovation practices and Closed Innovation practices for its sustainable development. Small and Medium Enterprises (SME) of Information Technology Industry in India have adopted innovation practices to the extent of fifty seven percent. Open Innovation has become one of the most recent topics for research in the area of innovation management.
Open innovation is a pioneering mechanism with increasing number of studies in the literature with large organizations and in the context of Europe and West. However, there are not many studies on Open Innovation and SME in Indian context. In addition, there are still a number of issues unclear in Open Innovation Theory due to its wide concept. Therefore, this paper aims to critically review the existing literature and develop a conceptual framework to establish a relationship between Firms, Open Innovation Practices, SME Characteristics, and firm performance. The paper establishes a need for studies in the area of open innovation among small and medium segments of the technology oriented industry. The paper also presents the research questions and research objectives of the study along with hypotheses. The paper concludes with the need of research and the contribution that will be made from this study to the world of academia.